ASX Copper Stocks
Australia is the 3rd largest exporter of copper in the world, behind Chile and Peru. Australian copper has over 7% market share in the world copper export market that exports copper worth over US$60 billion annually. Therefore, it is no surprise that the ASX is home to a quite a few copper stocks, and almost every investor already has exposure to at least one of them.
Copper prices are very sensitive to the global economy. The metal is extremely important to the manufacturing and infrastructure industries that usually determine economic activity. As global economies were put on a standstill, the price of the commodity took a pounding during March and April. However, since then the price has been climbing. The quick recovery of China has ensured that the demand for the commodity does not fall as other economies were put to a halt. A weak US dollar during the period has also added to the copper price increasing. News of a vaccine and return to normal are all fuels to the demand for the commodity during 2021. Going forward, Copper will be in high demand due to its use in the EV industry as the world shifts towards a clean energy model.
Australia-China Copper Trade Relations
China is the largest importer of a lot of commodities, and not just copper. Over 40% of the copper that is produced in Australia is exported to China every year. China imports more than half of all the copper that is produced in the world, and this year, China has been stocking up on the metal from almost every source it has access to. This panic-buying or buying has increased the demand for the commodity and thus, prices are soaring.
Even though China is the largest buyer of Australian copper, China imports so much copper that these Australian imports make up just 5% of the total copper imports into the country. The trade dispute between the two countries is thus hurting Australia. However, given how little copper is affected, the price of the commodity continues to soar.
Top 5 ASX Copper Stocks
BHP Group (ASX: BHP)
BHP needs no introduction to Australian investors. It is arguably the most well diversified mining stock there is on the ASX. BHP derives revenues from 4 main commodities – Iron Ore, Copper, Coal, and Petroleum. These commodities are very sensitive to the global economic outlook and activity. Approximately 25% of BHP’s revenues are derived from copper sales. This means that investors will get access to a giant in the copper market. BHP’s revenues from copper in FY2020 was $10 billion. This is larger than most pureplay copper companies out there. With stable revenues and a good dividend yield, BHP is a copper stock you want to have in your portfolio.
Rio Tinto Limited (ASX: RIO)
Another big dog in the commodities space is Rio Tinto. The company is dual listed – on the ASX and LSE. On the ASX, Rio Tinto has a market capitalization of $169 billion and the stock has returned over 12% in calendar year 2020. Along with copper, Rio also engages in the exploration and mining of other commodities such as iron ore, aluminum, diamonds, energy commodities etc. This is a very well diversified business that is relatively less risky than the market. The 5-year beta of Rio is 0.6. In FY2020, Rio reported $43 billion in revenues – a growth in the second half pushing revenues up. This was largely due to the higher commodity prices during the second half of 2020. Rio also pays fully franked dividend with a current yield of over 5%. Its good, well diversified copper stock to have at a very low risk.
Aeon Metals Limited (ASX: AML)
Aeon Metals Limited primarily explores for copper, cobalt, gold, lead, zinc, molybdenum, silver, and base metal deposits. Its flagship property is the Walford Creek project, where Aeon owns 100% interest and that covers an area of 211.6 square kilometers in northwest Queensland. This is a very early stage firm and is yet to generate positive cash flows. The potential is due to the resource that the Walford Creek project has – it has three components, Vardy/Marley Copper Resource, a Vardy/Marley Cobalt Peripheral Resource, and an Amy Copper Resource. These combined Resources of 40.9mt @ 2.03% CuEq (including 50,300t of cobalt metal content) shows Walford Creek to be one of the highest grades and largest tonnages copper/cobalt sulphide deposit in Australia. This makes AML a copper stock to look out for in the future.
OZ Minerals Limited (ASX: OZL)
OZ Minerals Limited engages in the exploration for, and the mining, processing and sale of zinc, copper, lead, gold, silver, nickel and other minerals into both metal and metal in concentrates in Australia and Asia. The company has built a portfolio of exploration and development projects in Australia, Canada, Tunisia, Sweden, Mexico, Laos, Thailand, Cambodia, Indonesia, and China. Another truly global copper company on the ASX. The stock price stock is currently trading at a 52-week high given the rise in copper prices. During the year, OZL has returned over 75% to shareholders. Thus, OZL is a good option for investors looking for copper stocks.
Sandfire Resources Limited (ASX: SFR)
Sandfire Resources Limited explores for, evaluates, and develops mineral tenements and projects in Australia and internationally. It primarily explores for copper, gold, and silver, as well as volcanogenic massive sulphide deposits. The company owns 100% interest in the DeGrussa copper-gold mine located in the Bryah Basin mineral province of Western Australia; and 85% interest in the Black Butte copper project located in central Montana, the United States. It also holds interest in the Tshukudu Project located in Botswana and Namibia within the Kalahari Copper Belt. During the last month, SFR has been one of the top performing copper stocks on the ASX – returning 28.6%. It is currently trading very close to its 52-week high, with a lot of headwinds still to carry copper prices going forward.
Copper prices are soaring, and high copper prices increases earnings margins for these firms. Given how diverse mining companies are, it is important to therefore to look at the outlook of all the commodities a mining firm is exposed to prior to making an investment decision. Find out what mining stocks we hold in our growth, dividend, and premium portfolios at Shares in Value by contacting us by clicking here.